Strategic Business Management
Advanced Stage
Sk Md Tarikul Islam FCA, MBA (UK)
Chapter-03
Strategic Implementation
By the end of this chapter, you should be able to
understand and apply:
Acquisition and strategic alliances
Aligning organizational structure and strategy
Managing change
Cost reduction
Evaluating functional strategies
Business plans
Acquisition and strategic alliances
Merger: Joining of two separate companies to
form a single company
Acquisition: Purchase of a controlling interest in
another company.
Classic reasons for acquisition:
– Marketing advantage
– Production advantage
– Finance and management
– Risk-spreading
Acquisition and strategic alliances
Better off tests:
Michel Porter suggests that potential acquisitions should
be assessed against three tests:
i. Better off test: Competitive advantage
ii. Attractiveness test: Structurally attractive, diversification
iii. Cost of the entry
Another key point is called parenting test.
**Ashridge Management School – 70% merger fails because of lack
of experiences.
Acquisition and strategic alliances
- The mechanics of acquiring company
PE Ratio
Accounting rate of return
Value of net assets including brand
Dividend yield
Discounted cash flows
Market prices
IQ 1: Due diligence
Acquisition and strategic alliances
- Acquisition and organic growth compared
Advantages of acquisitions Disadvantages of acquisitions
Quick entrance Can be too expensive
Can avoid barriers to entry Valuation issues
Deal can be made without Customer loyalty
cash Lack of fit
Favourable access to technical Post-acquisition cost
expertise, customer contacts Lack of information
and goodwill
Cultural differences
Rationalization cost
!! Stakeholders, banks, competition
IQ2: Growth strategies
Acquisition and strategic alliances
- Strategic Alliances
Reasons: Limitations:
Share development cost Core competence
Regulatory environment Strategic priorities
Complementary market/
technology
Learning from each
other
Technology (e.g. R&D)
Aligning organizational structure and strategy
Formal/ Top-down/ Challenges that inform
Command-and-control structure (J, S & W):
approach
-Flexibility of organizational
Burns & Stalker:
design (rapid environmental
- Mechanistic change, environmental uncertainty)
(McDonald) - Effective system (Creation
- Organic (Google) and exploitation of knowledge)
- Internationalization
Aligning organizational structure and strategy
- Configuration and Type of structures
Organizational configuration: Types of structures
i. Structure (J, S & W):
ii. Process Functional
iii. Relationship Multidivisional
Holding company
Matrix
Transnational
Team
Project
Aligning organizational structure and strategy
- Type of structures
Functional: People are organized according to the type of work they
do. E.g production , selling etc.
Multidivisional: Divide the organizations into semi-autonomous
divisions. E.g. product, market
Holding company: Divisions are separate legal entities
Matrix: Mixture of functional, product and territorial organization
Transnational: Attempts to reconcile global scope with local
responsiveness.
Team: Cross functional activities
Project: Employees from different departments works for a
temporary organization.
Project Management
Definition
A temporary organisation that is needed
to produce a unique and predefined
outcome or result at a given time using
predetermined resources. [Prince2,
2009]
Project Management
1. Cost, time and quality
Simplest way to consider project’s objectives
2. But which are the most important?
More time
Need to ‘trade-off’ may mean
Allows the prioritisation of the objectives a better
result
Effects decisions during planning
Effects decisions during execution More time
is likely to
cost more
3. The iron triangle
Project Management
Project Management
Project Management
-Project Life Cycle (PLC)
Managing change
The continuous process of aligning an
organization with its marketplace and doing it
more responsively and effectively than
competitors. – Berger
The process of change
Balogun and Hope Hailey flow chart:
Stage 1: Analyze competitive position
Stage 2: Determine type of change needed
Stage 3: Identify desired future state
Stage 4: Analyze the change context
Stage 5: Identify the critical change features
Stage 6: Determine the design choice
Stage 7: Design and transition process
Stage 8: Manage the transition
Stage 9: Evaluate the change outcomes
Lewin’s 3 stage model
The Ice cube model:
Unfreeze Change Refreeze
Lewin’s force field analysis:
- Define the problem
-List the forces supporting and opposing the desired change
-Draw the force field diagram p.160
-Strengthening or weakening forces
-Resources needed
-Action plan for timing, milestones and responsibilities
Balogun and Hope Hailey – Scope
of change
Realignment Transformation
Incremental Adaptation Evolution
Big Bang Reconstruction Revolution
Change Management
Change Management
IQ 4: Managing change
Turnaround
One specific situation when change management will be
required is a turnaround situation.
J, S & W identified 7 elements of such strategy:
Crisis stabilization
- Increase revenue and decrease cost
Management change
Communication with the stakeholders
Attention to target markets
Concentration of effort
Financial restructuring
Prioritization
Cost Reduction – Supply chain
mangement
Supply chain management: The planning and management of all
activities involved in sourcing and procurement, conversion, and
all logistics management activities.
Hierarchy of supply chain decisions:
- Supply chain design decisions
- Supply chain planning decisions
- Supply chain operation decisions
Cost Reduction – Supply chain
management
Push model: Based on historical sales pattern
Pull model: Demand driven
Drivers of supply chain management (Chopra and Meindl):
- Facilities
- Inventory
- Transportation
- Information
- Sourcing
- Pricing
Cost Reduction – Supplier
selection
Speed,
Quality
Price
Flexibility
Reliability
Strategic Procurement: is the development of true partnership
between company and a supplier of strategic value.
Cost Reduction – E_procurement
Advantages for buyer: Advantages for
Facilities cost savings supplier:
Easier to compare price Faster order acquisition
Faster purchase cycle Immediate payment system
Reduction in inventory Lower operating cost
Online catalogue Non-ambiguous ordering
High accessibility Data rich MIS
Lock-in of buyers
Data rich MIS
Automated manufacturing
Improved service level demand
Cost control
Cost Reduction – Business
Process Reengineering
BPR: Is the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical
contemporary measures of performance, such as cost, quality,
service and speed.
Outsourcing: is becoming a tool for cost savings. SLA usually
include –
- Service level
- Exit route
- Timescale
- Software ownership
- Dependencies
- Employment issues
Cost Reduction – Outsourcing and
assurance report
ISAE 3402, Assurance Reports on Controls at a Service
Organization applies only when the service organization is
responsible for, or otherwise able to make assertions about, the
suitable design of the control.
Objective of the service auditor p.185
Requirements and procedures p. 185
Points to note:
Type 1 report: Report on description and design of controls
Type 2 report: ++ operating effectiveness of control
Cost Reduction – Operations
Management
Operations management: Design, implementation and control of
the process in an organization that transform inputs into output
products and services.
5 types advantages of OM:
Reduce the costs
Customer satisfaction
Reduce the risk of operational failure
Reduce the amount of capital to be deployed
Basis for future innovation
Cost Reduction – Operations
Management
Operations performance objectives:
Quality
Speed
Dependability
Flexibility
- Product/service flexibility
- Mix flexibility
- Volume flexibility
- Delivery flexibility
- Cost
Cost Reduction – Operations
Management
Characteristics of operations can be summarized as the four Vs:
The volume of their output
The variety of their output
The variation in the demand of their output
Visibility to the customers
Cost Reduction – Capacity
planning
Level capacity plan: Maintain activity at a constant level
Chase demand plan: Match to the forecast fluctuations in
demand
Demand management planning: Reduce peak demand by
switching it to off-peak periods
Mixed plans: Mixture of the above three
Capacity control:
– Materials requirements planning
– Manufacturing resource planning
– ERP software
Cost Reduction – JIT Systems
JIT: Goods or services should be produced only when they are
ordered or needed.
3 key elements of JIT:
Elimination of waste
Involvement of all staff in operation
Continuous improvement
Cost Reduction – Quality
management
Quality assurance: Procedures and standards are devised with
an aim of ensuring defects are eliminated during development
and production process.
Quality control: Checking and reviewing work that has been
done. Narrower than quality assurance.
TQM: a popular technique of quality assurance. Main elements
are:
– Internal customers and internal suppliers
– SLA
– Quality culture within the firm
– Empowerment
Evaluating Functional strategies
Functional strategies: Support corporate and business strategy in terms of
resources, processes and people.
Evaluating functional strategies in terms of:
- Marketing
- Production
- Finance
- HRM
- IS
- R&D
Business plans
Foundation upon which a funding application will be made.
Contents of BP:
- Statutory data
- Executive summary
- Marketing
- Product/ service details
- Management team
- PP&E
- Start-up cost
- Business plan
- Summary
- Appendices
*ISAE 3400, The Examination of Prospective Financial Information
Conclusion
After having solid grounding, review as many
questions as possible to avoid panic in the
exam !!!
Questions??
Thank You !!
